Bank of America Debit Card Fees Slammed as "Durbin Tax"

I know I'm dating myself but I remember when people used to pay for purchases in cash and occasionally, with checks.

Not so much anymore.

Now, debit cards are all the rage. You know the ones (of course, since you likely have one). They look and function much like credit cards - only except instead of extending credit via the card, banks allow purchases up to the amount of money in your checking account. It's a plastic check if you will. And awfully darn convenient. It's also about to become expensive.

Bank of America isn't alone. Wells Fargo has made noise about a new $3 per month fee for debit card usage and J.P. Morgan Chase has signaled that they would impose a similar fee.

It's just another way that big banks stink, right? Or is it? Is there something else going on here?

Perhaps.

It turns out that there may be a method to Bank of America's madness. The bank claims that the move is in response to a pretty big anticipated loss in profit as a result of the so-called "Durbin Amendment." The Durbin Amendment is an add-on to the Dodd–Frank Wall Street Reform and Consumer Protection Act (Public Law No. 111-203), signed into law by President Barack Obama on July 21, 2010. The Act was meant to protect us from all of those banks that were too big to fail - you know, the whole banking/financial sector meltdown that we just lived through.

The Durbin Amendment, named after Sen. Dick Durbin (D-IL), was added to the bill after flopping around for the better part of a year. The law applies to those big banks - the ones over $10 billion in assets - and was ostensibly passed as an effort to increase competition. It was supposed to be pro-consumer.

But here's the kicker: the Amendment gave the Federal Reserve the power to regulate debit card interchange fees and other bits of banking admin, which they've done. Over the summer, the Fed released the final rule on the matter. The combination of fees, restrictions and caps is thought to cost banks subject to the amendment nearly $14 billion annually.